Skyrocketing life insurance claims have been grabbing headlines for some time now, but the impact on advisers – and the input of lawyers – has largely gone unreported, Craig Parker argues.
Few of us in the life insurance and financial advice industry could have failed to notice the sharp increase in the number of income protection and disability insurance claims over the past few years.
With the growing awareness on the importance of those forms of life insurance and the subsequent growth in sales, it is not surprising there has been an upswing in claims.
The result is that the ratio of living to death benefits now sits at an historic high at 2.5:1 (see Table 1).
But while most commentary on rising claims has focused on the profitability and sustainability impacts on insurers, two key consequences on the advice profession have gone largely unreported.
Firstly, the increasing number of claims has resulted in increased claims management for many advisers and practices, taking up increasing amounts of time to deliver a crucial service to clients when they need their adviser most.
At times of illness or injury, when a client and their family are usually under significant stress, risk advisers are providing their clients with dignity, choice and much-needed expert support.
This is why we are in business, this is why we have so much passion for this industry and this is where the risk adviser shows their true value.
But the second consequence – and more controversial – has seen this crucial advocacy and support role by advisers I have just described being usurped by lawyers.
The increased involvement of lawyers in claims is alarming because this is a role advisers should be performing on behalf of their clients. I have heard reports that a high number of claims involve the legal profession. The involvement of a lawyer will not influence the decision of an insurer. Claims advocacy is the role of the adviser.
Claims support is a key service proposition of the financial advice profession and if this is not carried out during this current period of heightened claims, advisers are failing to be customer-centric and therefore missing out on a crucial opportunity to demonstrate their on-going value.
This is the time for advisers to step up to the plate and ensure they are helping clients manage a disability, recuperation, return to work and other financial considerations that relate to a claim.
By working closely with the client to guide them through what can be a confusing process, risk advisers provide a vital service. Advisers need to own this space and not allow the door to be opened to other professions for a role that is rightfully theirs.
While supporting a client through the claim process can be time-consuming and emotionally draining for an adviser, the advisers I speak to on this topic around the country all agree that this is where their true job satisfaction lies.
At claim time, risk advisers must work proactively with the product manufacturer to ensure the full and complete story is shown.
Often a client’s situation is complex and an experienced risk adviser knows how to navigate the waters to get the best possible outcome for their client.
All product manufacturers pay legitimate claims, but collating the information they require can be a big ask for a client going through a traumatic personal situation. With a specialist risk adviser to guide them and liaise with the insurer on their behalf, the process becomes dramatically more manageable for the client.
Experience has shown us that risk advisers must have clear processes and checklists in place to ensure they provide a seamless claims experience.
When juggling multiple cases and claims, having fixed systems in place eases the workload on the adviser and enables a client to feel confident that their adviser has everything under control.
After the claim has been agreed with the insurer, many advisers are also involved in supporting their client through recuperation and return to work.
Assisting a client back to health, or in building a new and fulfilling life, is one of the most rewarding aspects of being a risk adviser.
I believe the role of the risk-specialist financial adviser will only grow in importance as the community gains greater understanding of the need for risk insurance. Our industry, which is built on the foundation of trust and relationships, will become more and more about the personal connection between an adviser and their client.
Against this backdrop, advisers will need even greater support from their dealer group and from their peers – whether their network is online, at conferences and events, or simply a chat over the phone. We’ve seen advisers respond very positively to the chance to build their peer networks, and we think this demand will only grow.
Ultimately, it looks like the number of complex income protection and disability claims will continue to rise for some time yet. Nevertheless, I see strong signs that the risk-specialist advice industry is well-positioned to navigate and continue to deliver the very best service possible for clients.
Craig Parker is general manager of Affinia Financial Advisers.
